I've heard that to fully exploit 1080i's resolution, one needs a screen size of at least 65inches....is this true?

This can be true depending on your viewing situation. Have you even taken a low resolution picture or video on your PC and blew it up to full screen? I bet it looked horrible but if you actually stood up and walked a few feet away from your monitor it didn't look as bad. The same scenario applies to high definition television. At shorter viewing distances larger screen sizes benefit most from resolutions like 1080i/p.

This can be true depending on your viewing situation. Have you even taken a low resolution picture or video on your PC and blew it up to full screen? I bet it looked horrible but if you actually stood up and walked a few feet away from your monitor it didn't look as bad. The same scenario applies to high definition television. At shorter viewing distances larger screen sizes benefit most from resolutions like 1080i/p.

I see.
So by all accounts, 1920x1080 on a 40inch LCD HDTV at 1.8-2mtrs should be an improvement over a 720p panel, not to mention having the ability to playback Bray and stuff.